Facebook shareholders sue company and its bankers over fishy IPO

Facebook shareholders have filed a class action lawsuit against the social network, as well as underwriting banks including Morgan Stanley, over its first-day trading slide, the law firm Robbins Geller Rudman & Dowd announced this morning.

The situation is admittedly confusing, because Facebook’s amended S-1 was quite pessimistic about revenues from mobile devices, as we reported at the time. Since the S-1 is a public document, it’s hard to argue that Facebook was hiding anything, unless it was privately giving different information to the underwriters.

“The true facts at the time of the IPO were that Facebook was then experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices … such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012,” the complaint reads.

The underwriters then subsequently lowered their estimates for 2012, “which revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors.” That’s exactly how an IPO process is not supposed to work.

The suit was filed in in a Manhattan U.S. District Court this morning, and it comes on the heels of a suit filed yesterday in California as well as a subpoena filed in Massachusetts yesterday. We’ve asked Facebook for further comment and will report if we hear back. Find the full complaint below.